Close to three in four homeowners believe a big bank would not provide the best service in the case of a life-changing event such as unemployment, divorce or death, a new study of over 1000 Australians has revealed.
The research undertaken for online lender State Custodians found 72% of respondents would rather turn to an alternative option such as a small lender, broker, accountant or lawyer for better service, even though 80% of home loans in Australia are held by the big four banks.
Joanna Pretty, General Manager at State Custodians, stated that it can often be difficult and confusing for Australians facing financial or personal hardship to make major decisions, so it’s essential they find an institution they can trust and rely on.
“I think trust is very important in dire situations and sometimes with larger institutions people can feel like they’re ‘just a number’. So any organisation or people who can give you the right information and reassure that they’ll look after you is important,” she said.
The study showed that Australians are largely divided when it comes to who they would seek advice from in the event of uncertainty or hardship, with 37% of respondents stating they would turn to a smaller lender, while 28% would seek out a big bank, and 22% an accountant, lawyer, or financial planner.
Pretty advised people looking for a home loan to, “shop around first, and talk to different institutions and experts such as financial advisors or accountants, to see who they’re comfortable with and how they can help.”
According to Mozo’s home loan database, another benefit of going for a smaller lender over a big bank is the difference in rates available. For instance, the average big four rate currently available is 4.71%, whereas the lowest rate is offered by online lender Reduce Home Loans at 3.35%. On a 25 year loan, a borrower with a $500,000 loan would save $112,807 by going with the latter.
“Smaller institutions tend to specialise with different products and services, and are very good at helping people who fall outside traditional parameters. They can also have more of an open mind as to what kind of deal they’d be prepared to do with a customer, as they’re used to evaluating extenuating circumstances,” added Pretty.
Attitudes also varied between genders and age groups, with the study showing 32% of women would be most comfortable relying on a big bank in times of stress compared to 25% of men.
Meanwhile older homeowners (50 and above) were more likely to turn to a smaller lender (46%), compared to 35% for those aged 35-49 and 34% for those aged between 25 and 34.
On the hunt for a competitive home loan deal? Mozo compares 507 mortgage packages from everyone from the big banks to the smaller challenger brands to help you find the best home loan for you.